Employer Retirement Planning

A qualified retirement plan must meet certain requirements based on the Code set forth by the Internal Revenue Service. These requirements set minimum and maximum participant levels, speed of vesting on employer contributions and disparity of contribution levels. In return for meeting these requirements, employers are allowed many tax advantages to encourage businesses to establish and maintain a qualified retirement plan.

Advantages for employer

· Employer contributions and in general the expense to maintain the plan are tax deductible.
· Retirement plans attract and help retain key employees, helping your company to stay competitive in tight labor markets.
· Employer contributions can be used to motivate employees.
· Allow employers to help their employees plan for retirement.

Advantage for employees
· The earnings on participants’ investments accumulate tax-free and are not taxable until the funds are distributed to the participant.
· Employees are able to make pre-tax contributions into certain types of defined contribution plans. This allows employees to defer federal and in most cases state income taxes, through the automatic payroll deductions.
· Receive immediate investment return when a company match is available.

Selecting a Plan – There are different types of plans from which to choose. Your decision will be based upon your company and personal goals. The following plans are types of defined contribution plans. Pension Performance, Inc. can discuss your needs in detail and help you decide what type of plan is right for you.

Defined Contribution Plan – Type of Qualified Retirement Plan where the contributions vary year by year. There is not a specific amount of benefits at retirement. The employee or employer (or both) contribute to the employee’s individual account under the plan annually. These contributions are generally invested by the employee. The employee will ultimately receive the balance of their account, which is based on contributions and investment gains or losses.

Types of Defined Contribution Plans

  • Profit Sharing Plan
    • Salary Proportionate
    • Integrated with social security
    • Age-Weighted Profit Sharing Plan
    • Class Allocation Profit Sharing Plan
  • Traditional 401(k) Plan
  • Safe Harbor 401(k) Plan
  • Money Purchase Plan
  • Simple Plan

To determine what is right for your plan or for additional information, you may contact us at 815-733-6226.

Have any questions?

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